Sunday, December 03, 2006

Public Impacts, Private Profits, and Piloting Nuisances

What would be your reaction if someone told you that a company was going to build a facility to produce a product that you already had enough of, that the facility would be in your backyard, that the facility would forever mar your neighborhood's appearance, that it might affect your health, and that it definitely would make your property less desirable on the market and reduce its value? Chances are if you could stop it by just saying no, you would. What if the facility would produce a handful of jobs, would that change your mind? What if the facility would produce a reliable source of income for your neighbor down the road, would that change your mind? What if the facility would reduce your local property taxes by one-third, would that change your mind? What if the facility would result in a reduction of emissions of CO2 to the atmosphere, would that change your mind?

No, this isn't about NYRI (though it is related). This is about windmill farms to produce electricity, discussed yesterday in three articles in the Observer Dispatch here, here and here. The above questions are probably swirling about in the minds of Herkimer County leaders in deciding whether or not PILOT (payments in lieu of taxes) agreements should be given to the companies involved.

It was the PILOT aspect that got this blogger's attention. A PILOT agreement means that these facilities would pay less to local government than they would have had they been taxed like everyone else. PILOTS are usually used to entice a facility to come to a community where they otherwise would not locate.

Does Herkimer County need to entice windmills?

Herkimer County has no shortage of electricity, and wind power is more expensive than what is currently available. So, from a power aspect, Herkimer County has no need for the windmills. The need resides elsewhere.

After a temporary jump in jobs during construction, few jobs would be created for the long term. Thus, the windmills are not needed for job creation.

Maybe it is about money. While these facilities will not be paying their full share of local taxes, they still would bring in a lot of new revenue. Certainly, local government people would like the windmills because they will make it easier to spend money without a tax increase and to even enable a tax cut. This might ensure re-election of local officials. But is this a reason to give a PILOT? Will the future live up to the promise? In this regard a windmill is similar to an animal feedlot: both are nuisances to their neighbors. While the landowners participating in the project will benefit financially, their neighbors will get an eyesore and a reduction in their property values. More importantly, development on surrounding properties will be discouraged into the future. Additionally, windmill farms create a need for more long-distance power lines (like NYRI) to deliver the product to market. That only increases the negative environmental and financial impacts and the number of people affected. Financially, the long term net result of the windmill projects is not clear .

The articles indicate that if PILOTs are not given, the projects will not be built, implying that the projects are not financially viable without local government help. If true, then what is happening is that the public in Herkimer County (with incomes far below the national average) is being asked to subsidize the projects both financially and by accepting negative impacts to their environment, in order to produce benefits for people elsewhere. But if people in the benefited regions need the power bad enough, should they not be willing to pay off all the people negatively impacted? Herkimer County's true value as a site for wind farms should become more evident as time goes on -- and that value is probably a lot more than what it is being offered now.

Viewed from that perspective, the answer to whether or not PILOTs should be given for windmills should be obvious.


Anonymous said...

In regard to PILOT, I could not agree more. It is always the people that have to pay, and it is long past time it stops. I do believe we need more production of energy. Every time there is opposition to generation whether it be Herkimer County, Kirkland or Brooklyn that opposition is providing cover for the utilities and their shareholders, and politicians to keep rates high.

If it is true that property values close to these facilities (and we are not talking nuclear reactors here) decline because of their proximity. The government in it's agreement with the windmill companies could lower or eliminate property tax, or possibly provide power to those effected. There are ways to offset lowering of property values.

Our state needs more energy production in some form. I would rather see these windmill farms generate power for Herkimer County's own municipal power company but that's for another time. I would rather see the communities that take on these projects reap the financial benefit than some far away company.

Strikeslip said...

If nearby property values decline, the government will have to lower property taxes for those properties because of the declining values -- leaving it up to everyone else in the town to make up the difference. But a decrease in taxes is unlikely to balance out a decline in values.

Municipal power is a great point. If the public affected were to reap the benefits of the project, most opposition should go away.

State policy should recognize that benefits and impacts are somewhat localized -- and require that those who suffer the impacts get a benefit of equal or greater value. This idea should not only apply to power generation/transmission, but to any facility or project eg landfills.